Last weekend I enjoyed a really fascinating excursion exploring the Vredefort dome area. I was delighted to hear that there is a good old fashioned academic squabble taking place about the likely cause of this massive geological event that took place there about 2.3 billion years ago. Our guide and lecturer is a major protagonist for the asteroid impact theory. If his theory is correct then it seems that a very large chunk of space rock thudded into the deck quite close to where Parys was going to be. It was cruising along at something like 20kms a second and landed with a bit of a bang. The next few minutes would have been rather hectic, what with rocks melting, dust rising and a shock wave rolling out in all directions. The neighbourhood quickly became rather inhospitable. The only life forms around in those days were colonies of blue-green pond scum, doing very little except hanging about waiting to evolve. They were fried. And then they were buried under a vast layer of sediment and ash, as what was thrown up from the crater came raining back down to earth. Nasty
The parallels with what has been happening in these markets these last few weeks are obvious. The Governor’s interest rate cut in mid-August landed on Gwen Lane like giant meteor. There was a huge impact. Rand bulls disappeared into the crater. The shock wave blasted the All Share index almost 20% higher. All bear-like life forms got burned. Untidy.
Now we just have to avoid being wiped out by the falling debris.
The surge has rerated the market by quite a significant amount. At a 2.65% dividend yield and 15pe the market is probing valuation heights that have previously proved shaky. But it’s difficult to get off such a fun ride.
Watch for next week’s appearance of Governor Mboweni in front of the lights and cameras after the Monetary Policy Committee’s deliberations. The general view is that he will leave interest rates unchanged. But do remember that this is that same view that completely missed the half percent asteroid in August. I think the more important date in the near future is the US election in November. I doubt that my long expected Wall Street showdown will take place before that event. But I think that the markets will not give the new White House resident much chance to catch his breath before asking a few difficult questions.
Those of us who have been waiting for the FNB preference share issue were disappointed this week to discover that all R3bn worth had been privately placed and that there is to be no public offer. Just shows how much demand there is for anything that’s got some tasty yield. The latest announcement even didn’t bother to hint what the coupon level might be. We’ll just have to buy some in the market when they list next month.
Have a wonderful weekend. And if you plan on some fishing down Parys way ….. tight lines
James Greener
8th October 2004
